KUALA LUMPUR, Dec 10 — Datin Paduka O.C. Phang, a former general manager of the Port Klang Authority (PKA), and two others were arrested by police today in connection with the Port Klang Free Zone (PKFZ) scandal.

They were picked up in a joint operation between police and the Malaysian Anti-Corruption Commission (MACC).

It is understood that they will be charged in a Klang court this afternoon.

Parliament’s Public Accounts Committee recently recommended that former Transport Minister Tan Sri Chan Kong Choy and Phang to be investigated for criminal breach of trust in the PKFZ scandal.

It also recommended investigations into the role of other government officials serving in PKA when the project was being developed.

The PAC found both Chan and Phang to have breached the Financial Procedure Act 1957 by issuing three letters of support and three letters of undertaking without the approval of the Finance Ministry.

The PKA had already sued Phang on Oct 8 for breach of duties in connection with the scandal-plagued PKFZ project.

“The committee was informed by the Attorney-General that three support letters were issued by former Transport Minister Tan Sri Chan Kong Choy and the three letters of undertaking issued by the general manager of PKA implicitly was a form of a guarantee from the government to ensure that there will be allocations for PKA to be able to meet its obligations under the development agreement.

“Therefore, a thorough investigation must be conducted by the Malaysian Anti-Corruption Commission and police into this matter under section 14 (1) of the Financial Procedure Act 1957. It can also be convicted with criminal breach of trust under section 409 together with section 409B of the Penal Code,” the PAC said in its report to Parliament.

The committee also reported that the bonds were not issued through the proper channels and the funds allocated were not fully utilised for the project.

The report recommended that the Finance Ministry review the bonds so that they could be redeemed to avoid increasing the debt due to the high bond rate of 7.5 per cent imposed by PKFZ developer Kuala Dimensi Sdn Bhd (KDSB) compared to the normal four per cent issued by the government.

The report pointed out that the letter of undertaking issued by Phang went against the government decision which had decided that the PKFZ should be self financed by PKA when the project was approved.

The PAC also noted that Phang and Chan had failed to inform the Cabinet in a “timely manner” of PKA’s inability to finance the project although this matter has been raised in reports of the Auditor-General’s financial statements from 2003 to 2007.

In October, PKA also filed a civil suit against Phang for breach of duties in connection with the scandal-plagued PKFZ project.

PKA chairman Datuk Lee Hwa Beng alleged that Phang had failed to comply with Treasury guidelines and safeguard PKA’s interest when entering into agreements for the construction of the PKFZ project.

PKA also filed a RM920 million lawsuit against KDSB and BTA Architect.

This comes after it filed a separate RM720 million lawsuit against KDSB a week earlier, bringing the total amount being legally disputed to RM1.64 billion.

Several efforts have been made to get to the bottom of the woes facing the troubled transshipment hub including a special task force set up by PKA which was superseded by a new “super” task force announced by Prime Minister Datuk Seri Najib Razak recently.

The PKA task force, in its report, had claimed breaches in duties, including by Chan, and a possible conspiracy between external contractors and insiders to harm PKA, the developer of the PKFZ.

Chan, who served as minister of transport for five years beginning in 2003, was alleged in the report to have failed to comply with Treasury guidelines and also failed to table proposals to the Cabinet, instead seeking approvals directly from then-Prime Minister Tun Abdullah Ahmad Badawi.

He was also alleged to have failed to wait for a master plan for PKFZ to be ready, and ignored a recommended mixed development strategy, pushing instead for PKFZ to be developed in a single phase.

Phang was found by the task force to have approved “fraudulent” claims made by KDSB. – Malaysia Insider